How to Get Out of Credit Card Debt in 2009 – Part 1 Reality Check

Okay, so you’ve made a commitment for 2009. You’re going to work hardcore to pay down your credit card debt this year. Congratulations!

Getting out of debt isn’t rocket science. People do it every day, with a good dose of discipline and money-saving habits, which they practice consistently until they are debt free. It takes diligence, and you can do it.

If you’re dying to know what life feels like without the stress of huge debt clouding your head every day, read on. Here’s what you need to do to join the ranks of the cool, debt-free kids on the block.

1) Calculate your actual debt
If you’ve been spending more money than you make (and you obviously have or you wouldn’t be in debt!), then you need a reality check. Grab your credit card bills and your inhaler, and sit down and do the math. You have to see the light and know—to the cent—how much money you owe. Remember to add up all your credit card bills for your total debt, and don’t panic. You’ll get out of it, if you stay on course and face your debt demons.

2) Do not add another cent to your debt
To the financially unaware, “debt” sounds like a big adult word. Some company sends you a bill and you can opt to pay them whatever you want, right? Well, here’s another way to look at it.

Debt is money you borrowed—plain and simple. It is money you OWE another party. You wouldn’t take $10,000 from a friend and never pay them back, right? When you look at it at face value, it becomes obvious that if you want to get ahead money-wise, you really need to stop borrowing money. So stop.

From now on, if you don’t have the cash in your bank account to buy the stereo, shoes, dress, whatever, then you really can’t afford it. Try it out for a month—just spending cash. You’ll get an idea of the way you spend money, and actually see where you overspend and how often you miscalculate the amount of money you actually have.

3) Find out Your Interest Rates
Credit card companies aren’t your friends, because they’ve been charging you interest on every purchase you make. Ideally, you want to be with a credit card company that charges around 10% interest, but if you miss payments and/or have a bad credit score, it’s likely that you’re paying up to 22%, which is SUCH a waste of money. It means that those shopping sprees cost more than you pay at the register—like you are being charged 20% more than what the price tag says! Once you see how much your interest rates are, you can determine which card is the most dangerous credit card in your wallet—and take action accordingly.

4) Find a 0% Balance Transfer Credit Card
Yes, it’s true. We’re recommending you shop around for yet another credit card. But the point of this new card is for you to pay your debt down without accruing any additional interest. You’ll transfer the balance from your high-interest credit cards onto a new credit card with a low introductory interest rate. This step is crucial to paying down your debt, and we’ll get into the nitty gritty in the next segment. Stay tuned!

And remember, debt is what it is. It’s money you owe, and the sooner you start paying it back, the sooner you will get to pay yourself. This session might have been a tough one, but it’s just the wake up call you need to get going on your goal of getting out of debt in 2009.